Without further delay, here is the second part of my analysis of Advocate General Wathelet (AG Wathelet*)’s opinion (the Opinion) in the Achmea case (check my previous post for a factual background on this case).

As previously discussed, the issue put before the Court of Justice of the European Union (the CJEU) in this case concerned the compatibility, with respect to EU law, of an arbitration clause contained in an intra-EU bilateral investment treaty (a BIT).

– the question regarding the alleged discriminatory character (contrary to Article 18 of the Treaty on the Functioning of the European Union (TFEU)) of an arbitration clause contained in an intra-EU BIT; and

– the possibility for arbitral tribunals established in accordance with an intra-EU BIT to refer questions to the CJEU for preliminary rulings.

As promised in my last post, this article now covers the issue of whether an arbitration clause contained in an intra-EU BIT infringes Article 344 TFEU which prohibits EU Member States from submitting a dispute concerning the interpretation or application of EU law to any other method than those provided for in the EU treaties.READ MORE

On 19 September 2017, Advocate General Wathelet (AG Wathelet)* handed down a long-awaited, surprising and potentially far-reaching opinion (the Opinion) on the compatibility, with respect to EU law, of an arbitration clause contained in an intra-EU bilateral investment treaty.

The dispute at hand concerned a Dutch insurance company, Achmea (Achmea), which had established a subsidiary in Slovakia in order to market private sickness insurance products in this country. In 2008, following a change of legislation in the insurance sector in Slovakia, Achmea initiated investor-State arbitral proceedings against that State on the basis of a bilateral investment treaty (a BIT) entered into in 1991 between the former Czechoslovakia and the Netherlands (the Czechoslovakia-Netherlands BIT). Essentially, Achmea alleged that Slovakia’s legislative amendments violated certain provisions of the BIT.

In 2012, the arbitral tribunal sided with Achmea and issued an award ordering Slovakia to pay Achmea damages of approximately EUR 22 million.

Subsequently, and since the place of arbitration was in Germany, Slovakia brought an action before the German Courts seeking the annulment of the award rendered against it. In those proceedings, Slovakia argued that:

– The arbitration clause contained in the Czechoslovakia-Netherlands BIT infringed the prohibition of discrimination on grounds of nationality contained in Article 18 of the Treaty on the Functioning of the European Union (TFEU). More particularly, Slovakia argued that the arbitration clause contained in the Czechoslovakia-Netherlands BIT was discriminatory since it only offered Dutch investors the possibility to recourse to arbitration to solve their dispute with Slovakia whereas investors of the Member States which had not concluded any BIT with Slovakia were precluded from benefiting from a similar treatment.

– The award rendered against Slovakia was contrary to public policy since the arbitral tribunal established in accordance with the Czechoslovakia-Netherlands BIT – being unable to request the Court of Justice of the European Union (CJEU) to give a preliminary rulings on the interpretation of EU law – failed to take account of fundamental principles of EU law (such as rules on the free movement of capital or the rights of defence). This argument was based on the fact that, pursuant to Article 267 of the TFEU, only courts and tribunals of Member States are entitled to request the CJEU to give a preliminary ruling on a matter pending before them. However, the arbitral tribunal established pursuant to the Czechoslovakia-Netherlands BIT was not a “court or tribunal of a Member State” and it was therefore not entitled to request preliminary rulings from the CJEU.

– The arbitration clause contained in the BIT infringed Article 344 TFEU which prohibits EU Member States from submitting a dispute concerning the interpretation or application of EU law to any other method that those provided for in the EU treaties.

Uncertain as to the answers to those issues, the German court stayed the proceedings and referred the matter to the CJEU for a preliminary ruling. Prior to the judgment of the CJEU (which will be delivered in the coming weeks/months), AG Wathelet handed down his independent Opinion.READ MORE

As we already discussed in several posts before (here, here, here and here), the European Commission (the Commission) has been pushing forward the establishment of a multilateral investment court (Multilateral Investment Court) in order to address the numerous criticisms concerning the existing investor-State dispute resolution (ISDS) mechanisms.

In essence, the Commission’s proposal aims at dealing with procedural issues arising in the context of ISDS. In this vein the Commission proposes:

(i) The creation of a permanent investment court which would have exclusive jurisdiction to rule on investment claims and would therefore render forum-shopping and multiple parallel proceedings impossible;

(ii) That this permanent court would be composed of a First Instance Tribunal and an Appellate Tribunal;

(iii) That judgments would be made by publicly appointed judges; and

(iv) That proceedings would be transparent and a right to intervene for all interested countries would be provided.

The original idea of the Commission was to institutionalise the system for the resolution of investment disputes within each bilateral investment treaty concluded by the European Union (the EU). Such a system (called the Investment Court System (ICS)) was the method followed during the negotiations for the EU-Canada Comprehensive Economic and Trade Agreement (CETA). The Commission, however, has since realised that, in the long run, this approach would lead to a duplication of the system (since there would be one ICS for each of the different investment treaties entered into by the EU) as well as further administrative and budgetary complexities. In order to address this issue, the EU decided to push its proposal one step further and suggested that, instead of negotiating bilateral ICS, it would seek the establishment of an international court which would have jurisdiction to hear investment disputes.

This Recommendation (adopted pursuant to Article 218 of the Treaty on the Functioning of the EU) aims (i) at allowing the Council of the EU to authorise the opening of negotiations for the establishment of a Multilateral Investment Court; and (ii) at appointing the Commission as EU representative during those negotiations.READ MORE

On 5 June 2017, I attended a conference in Nairobi on the development of arbitration in Africa. On this occasion, Mr Seyilayo Ojo (Senior Partner at S. O. & C. Legal in Lagos, Nigeria), who participated in a panel on the topic of “Arbitration as a Catalyst for Economic Growth on the Continent“, mentioned the so-called “FIRS” judgment rendered a couple of years ago by a Nigerian court which allowed a third party to challenge an arbitration award*.

On 11 July 2017, the United States Court of Appeals for the Second Circuit (the Second Circuit) rendered a decision in which it held that the Foreign Sovereign Immunities Act (the FSIA) provided the sole basis for jurisdiction over a foreign State in actions to enforce ICSID awards in the United States. Consequently, the Second Circuit also ruled that an award-creditor had to provide notice to the foreign State in order to enforce an ICSID award against that State. This ruling thereby effectively prevents ex parte enforcement of ICSID awards against foreign States in the United States.READ MORE

Since September 2015, the European Commission has been pushing forward a proposal for a new investment court system (ICS) aimed at addressing the numerous criticisms expressed about the existing investor-State dispute resolution (ISDS) mechanisms (see here, here and here for previous posts on this topic).

ISDS is a very sensitive topic since such disputes always place States in the position of respondents. Furthermore, they are seen by many as placing restrictions on a State’s right to sovereignty and right to regulate. In addition, the outcome of these disputes may profoundly impact the financial situation of a State. On top of those concerns, investor-State disputes are generally solved by recourse to international arbitration, a mechanism which is seen by many as lacking consistency, transparency and legitimacy.

In order to address those concerns, the key aspects of the proposal brought forward by the European Union are the following:

– The creation of a permanent investment court which would have exclusive jurisdiction to rule on investment claims and would therefore render forum-shopping and multiple parallel proceedings impossible;

– This permanent court would be composed of a First Instance Tribunal and an Appeal Tribunal;

– Judgements would be made by publicly appointed judges;

– Proceedings would be transparent and a right to intervene for all interested countries would be provided.

While I personally think that the ICS presents a step in the right direction, as it offers possible solutions to the main concerns raised about classical ISDS mechanisms, I do not think, nor pretend, that this proposal is free from any potential flaws.

Indeed, one of the main doubts expressed by many commentators against the ICS relates to the methodology for appointing judges to the First Instance Tribunal and to the Appeal Tribunal. For instance, in respect of the EU-Canada free trade agreement (CETA), it is currently contemplated that judges of the new investment court will be appointed by States and they should only serve a limited term of 5 years renewable once (Article 8.27 of the CETA).

If this appointment procedure is ever adopted, it will certainly not take long before the credibility, legitimacy, independence and neutrality of the whole system starts to be contested by the perception that the judges are biased in favour of States. It is indeed very likely that such a suspicion will quickly arise since those judges will be appointed (even if indirectly) by the States and because their term in office will be subject to re-appointment by those same States (meaning that the judges might be tempted to render decisions more favourable to States in order to be re-appointed).

While it remains to be seen whether the ICS will ever see the light of day, and if so under which form, I hereby suggest three possible alternatives/solutions in order to address the risk of State-partiality by judges.READ MORE